VAT on Agency Commission
· TVSH.AL Editorial Team
An agent may arrange a transaction for somebody else, sell in its own name, collect money, or provide a separate marketing service. Those models can create very different VAT invoices even when everyone calls the payment a commission. SMEs should map the legal and money flows before applying Albania’s 20%, Kosovo’s 18%, Italy’s 22%, or any cross-border rule.
Disclosed agent or acting in your own name?
A disclosed agent normally connects the principal and customer: the principal supplies the underlying goods or services, while the agent supplies an intermediation service to the principal and charges commission. An undisclosed agent acting in its own name may be treated as receiving and making the underlying supply, depending on the rules and facts. That can move the full selling price, not merely the commission, into the agent’s VAT records.
Review the signed mandate, customer terms, invoices, refund responsibility, price control, inventory risk, and who the customer can sue. Labels such as “partner” or “marketplace” do not decide the treatment. If the relationship is unclear, correct it before trading rather than trying to repair invoices later.
Map three flows before invoicing
Draw the underlying supply, the agency service, and the cash movement separately. Identify the supplier and customer for each arrow, place of supply, taxable amount, rate, and invoice issuer. A domestic Albanian agency service normally starts from 20%, a Kosovo service from 18%, and an Italian service from 22%, unless a specific reduced, exempt, or territorial rule applies. The underlying product keeps its own classification and does not automatically inherit the commission rate.
- Keep the mandate and customer terms.
- Record whether prices include VAT.
- Separate gross collections from earned commission.
- Reconcile client money to settlement reports.
- Retain customer tax-status and location evidence.
Use the invoice examples for core invoice fields and net and gross guidance when extracting VAT from VAT-inclusive commission.
Collection does not always equal turnover
Suppose an agent collects €12,000 from customers for a principal and is entitled to €1,200 commission before VAT. Under a disclosed-agency model, the €12,000 may be client money and the agent’s own supply is the €1,200 service. The principal accounts for the underlying sale; the agent invoices commission and transfers the balance according to the settlement statement. Under an own-name model, the result may differ fundamentally.
Never post only the bank movement without the settlement detail. Maintain separate ledger accounts for client collections, amounts due to principals, commission revenue, output VAT, refunds, and chargebacks. Confirm whether the contract permits net settlement and whether an invoice is still required. Compare monthly principal statements to invoices and the VAT return.
Cross-border agency services
When principal and agent are in different countries, determine whether the customer is a business and apply the relevant place-of-supply rule. A B2B commission service may fall where the business customer belongs and be invoiced under reverse charge, while B2C or special intermediary rules may point elsewhere. Do not use zero VAT merely because payment comes from abroad. Collect the business name, address, tax number, contract, and evidence of establishment.
Read VAT on services between Kosovo, Albania, and the EU. Italian and EU counterparties may also require a valid VAT-number check; digital platforms can have separate deemed-supplier rules, discussed in VAT on digital services. Cross-border agency arrangements deserve advice where the agent negotiates property, events, transport, or other services with special territorial rules.
Credit notes, cancellations, and controls
State who bears refunds and when commission is earned. If a customer cancels, determine whether the principal reverses the underlying sale, the agent reverses commission, or the agent retains a cancellation fee that has its own VAT character. Issue credit notes that reference the original invoice and rate. Do not net unrelated penalties or marketing support against commission without documenting each supply.
At month-end reconcile gross bookings, cancellations, fulfilled sales, principal liabilities, commission invoices, VAT, and bank transfers. Review manual adjustments and negative commissions. Albania businesses can consult the return guide; Kosovo businesses the Kosovo guide. This is general information, not legal or tax advice, and contracts should be reviewed under the law that governs the actual relationship.
Agency commission — FAQ
Is VAT charged on the full customer payment or only commission?
It depends on whether the intermediary is a disclosed agent or acts in its own name. The contract and commercial reality determine whose turnover the underlying sale is.
Can the agent deduct commission from money collected?
A net settlement may be contractually allowed, but it does not remove invoicing, VAT, reconciliation, or client-money record requirements.
Is foreign commission automatically VAT-free?
No. Determine customer status, place of supply, special rules, and required evidence. Reverse charge is a legal treatment, not a synonym for any foreign payment.
Who issues the invoice to the final customer?
Usually the supplier identified by the legal model. An agent may issue it on the principal’s behalf only where the arrangement and local invoicing rules permit.
How are cancellations handled?
Follow the contract, reverse the relevant original supply with a linked credit note where required, and classify any retained cancellation fee separately.
Verify the commission amount
After identifying the taxable commission and rate, use the free VAT calculator to check the net fee, VAT, and gross invoice.
TVSH.AL is an independent calculator, not a tax authority. Guidance here is for orientation — confirm current rules with official sources or a qualified advisor before you file.